The U.S. dollar's depreciation is ``negative'' for the Chinese economy, according to China's top currency regulator.

China will manage its foreign-exchange reserves ``according to set guidelines,'' Hu Xiaolian told reporters today in Beijing, where she is attending the annual meeting of the National People's Congress. ``To the extent that dollar depreciation is negative for the global economy, the Chinese economy will definitely be affected.''

A record trade surplus has flooded the Chinese economy with cash and drove the world's largest foreign currency reserves to $1.5 trillion by the end of 2007. Premier Wen Jiabao on March 5 warned of an increasing number of global uncertainties this year facing the economy, such as the dollar's decline and the U.S. subprime mortgage crisis.

``It's the frying pan or the fire for China,'' said Stephen Green, senior economist at Standard Chartered Bank Plc in Shanghai. ``If they stop buying U.S. dollars or diversify, this will only do further damage to their existing holdings.''

China, the second-largest foreign holder of U.S. Treasuries, said the declining dollar is a bigger concern for the Chinese economy than the yuan's gains, Chinese commerce minister Chen Deming said in December.

The dollar's depreciation makes major commodities such as gold and oil more expensive, and reduces the wealth of countries and companies that hold dollar assets, Chen said at the time.

China's economy, the world's fourth-largest, may grow 10 percent this year, according to the International Monetary Fund, down from 11.4 percent in 2007.